UnThreaded | Threaded | Whole Thread (8) | Ignore Thread Prev Thread | Next Thread
Author: jyates1959 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75779  
Subject: Should I sell out of my IRA? Date: 5/1/2011 9:28 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Hi all,

I've recently become the beneficary of a trust that I receive funds from yearly that exceed my regular yearly gross income x 2 which
has me trying to figure out a nice safe place to put the income that will grow.

I've got no debt other than a fixed rate low interest home loan with about 8 years left on it (house payment less than $500 a month).

I started an traditional IRA a few years ago and have about $28,000 in current asset values.

My accountant told me that it didn't make good financial sense for me to put any more yearly contribuations into my IRA because I am very likely to be in a higher tax bracket in the years to come and that it would be betteer for me to pay taxes on my income now instead of paying taxes on the money later when I withdrew it from the IRA account.

I'm nearly 52 so it's not very long between now and the 59-1/2 age where I could start drawing out of the IRA without penalty.


Should I go ahead and cash the IRA out and take the 10% penalty and pay the taxes on the roughly $28,000 in value now or just manage the stocks (buying and selling) and let it grow (hopefully) and perhaps be in a higher bracket in 8 years and pay even more in taxes on it?

Thanks,
Jim
Print the post Back To Top
Author: BruceCM Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68949 of 75779
Subject: Re: Should I sell out of my IRA? Date: 5/1/2011 9:41 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
No, that would not be a good idea. Your IRA assets are fine where they are. Tax deferred growth and no mandatory distributions until 70.5

Depending on the trust income, you'd probably be best served to contribute the max to your Roth IRA each year (assuming you have earned at least that amount), and leave your TIRA as is

BruceM

Print the post Back To Top
Author: Howie52 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68950 of 75779
Subject: Re: Should I sell out of my IRA? Date: 5/1/2011 9:51 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 2
"Should I go ahead and cash the IRA out and take the 10% penalty and pay the taxes on the roughly $28,000 in value now or just manage the stocks (buying and selling) and let it grow (hopefully) and perhaps be in a higher bracket in 8 years and pay even more in taxes on it?

Thanks,
Jim "

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Why even consider paying a penalty or taxes if you do not need the
funds?
If you see a benefit, you might convert the IRA to a Roth - but
even that seems an excessive thing to do.

Howie52

Print the post Back To Top
Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68951 of 75779
Subject: Re: Should I sell out of my IRA? Date: 5/1/2011 10:11 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 5
OK - how long is this trust income going to last? For a couple of year? A decade or more? Your lifetime?

Next - is the trust income taxable to you? Do you have to pay tax on the amount you receive from the trust? Sometimes you do - sometimes you pay tax on only part of the distribution - sometimes it's all tax-free. So which is it for you?

Depending on your answers, it might make a lot of sense to put money into a traditional IRA. Or it might make sense to put money into a Roth instead.

In any case, it makes no sense at all to withdraw money OUT of your existing IRA.

--Peter

Print the post Back To Top
Author: rainphakir Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68952 of 75779
Subject: Re: Should I sell out of my IRA? Date: 5/1/2011 10:24 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 3
Also, it does NOT sound like your accountant recommends taking the money out of the TIRA. Only that putting $ into it may not be the best choice. (i.e. leave the current funds there).

You can 'estimate' your income and the potential taxes, and make an educated choice based on that info.

You may also 'roll' the TIRA into a Roth IRA, moving a small enough amount each year over a period of several years to NOT cause an increase in your tax bracket - you will have to pay the taxes when the monies are moved. Rolling tax-deferred monies into a RIRA does not generate a 'penalty' as long as the taxes are paid as due.

As has been mentioned, leaving the TIRA alone, and putting future post tax income/savings into a Roth IRA is also an option.

You might also spend some time talking with a TAX lawyer about methods to reduce the tax burden, both now and in the future. You can put savings into tax free bonds, and other types of tax advantaged investments. Long term capital gains, in a taxable investment account, are currently 15%...

Congratulations on your good fortune :-)
ralph

Print the post Back To Top
Author: jyates1959 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68953 of 75779
Subject: Re: Should I sell out of my IRA? Date: 5/1/2011 11:02 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Thanks for the wonderful advice folks. I will just leave the IRA alone and manage what stocks I have in it now with a mind of growing the asset value of the portfolio and worry about making withdrawals later closer to that 70.5 mark if the good Lord lets me live that long that is!

Print the post Back To Top
Author: Watty56 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68954 of 75779
Subject: Re: Should I sell out of my IRA? Date: 5/1/2011 11:44 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
...I will just leave the IRA alone and manage what stocks I have in it now with a mind of growing the asset value of the portfolio ....


Becausw of the tax advantages people often find that it makes sense to hold their taxable bonds in their retirment accounts and hold their stocks in the taxable accounts.


Greg

Print the post Back To Top
Author: drippinfool Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68955 of 75779
Subject: Re: Should I sell out of my IRA? Date: 5/2/2011 11:48 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
"Becausw (sic) of the tax advantages people often find that it makes sense to hold their taxable bonds in their retirment (sic) accounts and hold their stocks in the taxable accounts.


Greg"


What he ^ said.

-drip

Print the post Back To Top
UnThreaded | Threaded | Whole Thread (8) | Ignore Thread Prev Thread | Next Thread
Advertisement